Rent Paid for office

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This query is : Resolved

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An LLP is seeking advice on how to account for monthly office rent payments. The rent is split, with a portion paid directly to the owner and the remainder paid to their relative as consultation charges. The user is unsure whether to classify the payment to the relative as 'consultation charges' or 'contract charges' and is seeking guidance on the correct accounting entry.

Suhasini Lad

Suhasini Lad (Querist)
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06 July 2022 Dear All,

We are an LLP organization. we have taken an office on rental basis. The rent charges is Rs. 15,000/- monthly. We make the payment of Rs. 8000/- as rent to the owner and balance of Rs.7000/- we make payment to his relative as consultation charges. How should I pass the entry for the same, should I consider Rs.7000/- paid as contract charges or consultancy charges, because my senior has advised me to consider the consultancy charges as contract charges.

Thanking you